Senate Study Offers Opportunity for Fresh Look at Charity Issues.

• Author: Broder, Peter
• Position: NOT-FOR-PROFIT

Canada, through the federal government and its provincial counterparts, offers preferential tax treatment to charities and certain other public benefit entities that is among the most generous of any country in the industrialized world. That advantageous treatment comes in the form of tax credits for individuals and tax deductions for corporations that make contributions to these groups. As well, governments forego taxes on much of the income generated by charities and bodies similar to charities, known as qualified donees. Goods and Services Tax and Provincial Sales Tax are also typically not applied or applied at a reduced rate.

To qualify for this special treatment, however, most of these entities must register with the federal government, and are subject to various constraints on how they are constituted and operate.

Not surprisingly, given the favourable tax treatment they get, Canadian authorities have been quite restrictive as to who is entitled to be a "registered charity" or other "qualified donee". This restrictive approach has been adopted both by the courts, in litigation concerning eligibility and conduct, and by the Canada Revenue Agency ("CRA"), the arm of the federal government charged with administering the provisions of the Income Tax Act ("ITA"), in its rules.

The restrictive approach has led to Canada falling behind in the breadth of legal meaning given to the concept of charity here, and to a regulatory environment that is stricter than that of many other countries. This situation was most recently highlighted by the controversy over the amount and type of non-partisan political activity that registered charities are permitted to engage in. In the wake of this controversy, and other frustrations with the current regime, there have been widespread calls for reform.

Potential ideas for changes to the existing system will have a chance to be aired (and perhaps move a step closer to being adopted) with the approval of a Senate Motion in late January. This is a Motion to strike a Special Committee on the Charitable Sector "to examine the impact of federal and provincial laws and policies governing charities, non-profit organizations, foundations, and other similar groups; and to examine the impact of the voluntary sector in Canada". The Committee will have nine members and is expected to submit its final report by December 31, 2018.

Although the precise terms of reference and membership of the Committee were not available at...